Richard Simpson's daily challenge is to persuade foremen on building sites to separate waste. The former architect is co-founder of the Brighton & Hove Wood Recycling Project, which has recycled nearly 6,000 tonnes of timber since it opened in 1998. All would otherwise have been buried or chipped.

The initiative was one of the first in Britain to take waste wood from building sites to be reused. From humble beginnings when he and a colleague lugged wood across town in a clapped-out camper van, the project has since become a model for community recycling.

"To building firms we were just a bunch of hippies," says Simpson. "But we were the first in the country to go to commercial building sites. The trick is to win over the foreman." And to have a steady stream of volunteers and staff, who between them have collected lab tables from Roedean school, stage sets, and timber from Brighton pier and English Heritage sites.

Grassroots projects such as this are playing an underrated but important role in diverting materials produced by construction from landfill. Simpson provides timber to customers as diverse as the Chelsea Flower Show, students and home improvers.

The project has become a model for community recycling nationwide. Simpson's co-founder, Richard Mehmed, has gone on to help establish 21 wood recycling projects in Cambridge, east London, Glasgow, Llandudno and Manchester, among others, using Brighton as a template.

These kinds of projects are making an impact but the task is herculean. Last week, the House of Lords science committee reported that householders account for 9% of the UK's waste annually. The construction industry, by contrast, generates 90m tonnes of waste a year, producing about 32% of the UK's total waste. Up to a third of construction materials end up in landfill and nearly 13% of materials delivered to building sites never get used.

The Lords called for councils to prioritise reducing waste from businesses, and argued that companies should be made responsible for the waste associated with their products. "We would like to see the VAT regime reformed so that products that have a long life-cycle, or can be easily and cheaply repaired rather than replaced, are made economically more attractive," said Lord O'Neill, who chaired the waste reduction sub-committee.

The threat of rising landfill tax, set to reach £48 per tonne by 2011, will certainly force construction companies to take waste seriously. "It can be difficult to persuade people of the moral argument behind recycling [but] when a business realises that it will affect them financially, they are likely to respond," says Zoe Le Grand, project manager at industry body Constructing Excellence. "Legislation is getting tighter. If they want to prepare their business for the future, they should get arrangements in place for recycling as soon as possible."

Some contractors have started to act. Taylor Woodrow ran a pilot plasterboard recycling scheme in 2005 resulting in recycling rates of 72% from its housebuilding programmes. And like many construction companies, Persimmon Homes' Anglia branch segregates waste materials into separate skips on site, with 300 tonnes of recyclate distributed monthly to metal, plastics and woodchip companies.

Skanska, one of the contractors for the £1bn Bart's and the Royal London hospitals' redevelopment, has during the project reached recycling rates of 99.6% - 50,000 tonnes. "A waste volume is agreed before we sign the contract," explains James MacMillan, the programme's environment manager. "If the trade contractor goes over that, they pay for the waste. The key is to prevent waste from coming to site in the first place, [by] reducing packaging and working with trade contractors. Segregation and waste management should be the last link in the chain."

Reuse of recyclate brought in from elsewhere is becoming more common. BAA's Terminal 5 construction at Heathrow reused more than 80,000 tonnes of materials. Crushed glass from local recycling banks was used to make site roads and around 30% of the concrete mix used for buildings, taxiways and aircraft stands was from a power generation byproduct, pulverised fuel ash.

For smaller building firms that do not have the resources to employ an environment manager, help is at hand. Guidance has emerged from the Waste and Resources Action Programme (Wrap) and the Environment Agency's NetRegs website.

The government, it seems, has woken up to the construction waste problem. Last April, the Environment Agency mandated site waste management plans for construction projects in England worth more than £300,000, in which, from the pre-construction stage onwards, firms must declare waste materials and how they will be disposed of. The agency says this will cut 100m tonnes of waste annually.

Last June, the Strategic Forum for Construction, an industry-cum-government body, launched the strategy for sustainable construction, declaring aims for 50% reduction of construction, demolition and excavation waste to landfill by 2012 compared with this year. In May, the Construction Resources and Waste Roadmap was published by a public-private consortium, proposing 10 actions. The report was funded by a body of the Department for Environment, Food and Rural Affairs.

But the outlook for agencies created by the government to encourage sustainable practice among business is beginning to look gloomy. In the next tax year, the government plans to cut funding for environmental advisory agency Envirowise by more than 50%, and the Market Transformation Programme, National Industrial Symbiosis Programme and Wrap will all see their budgets slashed, something the waste reduction sub-committee expressed "extreme disappointment" over.